American Ins. Co. v. Gilbert

• Decision Date: 15 July 1873
• Citation: 27 Mich. 429
• Court: Michigan Supreme Court
• Parties: The American Insurance Company v. Orin F. Gilbert

27 Mich. 429

The American Insurance Company v. Orin F. Gilbert

Supreme Court of Michigan

July 15, 1873

Heard May 2, 1873

Error to Washtenaw Circuit.

Judgment reversed, with costs, and a new trial awarded.

W. K Gibson, for plaintiff in error.

S. E Engle and H. J. Beakes, for defendant in error.

OPINION

Christiancy, Ch. J.

This was an action brought by Gilbert, the defendant in error, against the insurance company, upon a policy of insurance upon a dwelling house, and barn and shed, and the personal property in each, as well as certain personal property on the farm of plaintiff. The policy was dated September 26, 1871, and was for five years from the 19th day of August, 1871. The house with the barn and its adjoining shed were burned on the 11th of November, 1871, with some of the personal property in each, and the action was brought for this loss.

The policy was issued upon a written (and printed) application, signed by the plaintiff, the printed form for which seems to have been furnished by the company, with blanks to be filled, and printed questions to be answered thereon in writing by the applicant. The plaintiff had no legal title to the buildings insured, but had, in April previous, obtained a contract from one Prentice for the purchase of the farm of eighty acres, including the buildings, for the price of four thousand dollars, upon which he had paid Prentice only fifty dollars; and the balance was to be paid in installments, the first being for two thousand dollars payable April, 1872, upon payment of which he was to receive a deed and give a mortgage back to Prentice for the balance. Prentice covenanted to convey a good title, free of incumbrances. At the time of this contract, and at the time of the loss, there was an outstanding mortgage to one Smally on the land, upon which there was a balance of some three hundred dollars or more unpaid. The principal questions involved are: 1st. Whether there was not an over-valuation of the house and barn by the plaintiff in his application; and, 2d. Whether the plaintiff did not fail truly to state the incumbrances in answer to a question upon that subject contained in the application. The policy refers to the application, and expressly makes it "a part of the policy, and a warranty by the assured," and it further, in this immediate connection, provides that "false representation by the assured, of the condition, situation or occupancy of the property, or any omission to make known any fact material to the risk, or an over-valuation, or any misrepresentation whatever, either in the written application or otherwise, shall render the policy void." By this provision, it is true, that, to render the policy void on account of an omission to state a fact, the fact omitted must be one material to the risk. But the provision in reference to false representation, or misrepresentation, which shall render the policy void, is not thus limited by the language used, and cannot be so limited without doing violence to that language. Nor does it follow, as argued by the counsel for the defendant in error, that the use of these terms, "false representations," and "misrepresentations," indicates an intent to reduce the object of all the statements of the assured contained in his application to that of representations, instead of warranties. On the contrary, the plain object, as it seems to me, of inserting this provision in reference to false representations and misrepresentations, so far as they might be contained in the application, was to explain and apply the general provision making all the statements in that application warranties.

Hence, like the warranty to which the provision refers, the effect of such false representations or misrepresentations is not made to depend upon the question, whether they relate to matters material to the risk, but they are to render the policy void, whether material to the risk or not. In other words, it would seem to have been the clear intent of the whole provision, including that of the warranty with which it is immediately connected, to make every actual misrepresentation contained in the application a warranty which, if false, should render the policy void; while the mere suppression of, or omission to state, any fact, should only have that effect when the fact suppressed was one material to the risk. This is not like the case of Elliott v. Hamilton Mut. Ins. Co., 13 Gray 139, where, though the application was made part of the policy and a warranty on the part of the assured, yet, by the express language of the provision, the misrepresentation and the suppression of facts were placed upon the same footing, and both confined to material facts. Thus, only facts material to the risk came within the warranty. Where there is no express stipulation making representations warranties, courts very properly incline to treat them as representations merely, and therefore of no consequence, unless shown to be material to the risk. But parties have a right to make their own contracts upon such terms and conditions in this respect as they see fit. And if the insured chooses to make his representations warranties, the question of their materiality becomes unimportant, or rather (for this is the principle involved) the insurer is relieved from showing, and the assured is estopped from denying, that they are material to the contract; and no court can be permitted to say that the insurer did not deem them material to the risk, or that he would have made the contract upon other terms than he has made it. There may be many matters which the insurer may deem, and which experience may have satisfied him are material to the risk, but the materiality of which he might not be able to prove to the satisfaction of a jury; and he has a right to refuse to insure, unless upon the terms that such matters shall be made warranties by the assured, and when so made, it is an agreement on the part of the assured, not only to warrant the truth of such matters, but that they are material to the contract, and that, if false, the contract shall be void. All the statements and representations, therefore, contained in the application, must be treated as warranties; and therefore, according to the general rule, as settled by the great weight of authorities, must be strictly true to authorize a recovery upon the policy. It is, however, sufficient for all the purposes of the present case to say, that they must be substantially true. The application states the value of the house at four thousand dollars, and asks for two thousand five hundred dollars insurance, and the value of the barn at three hundred and fifty dollars, and asks insurance for two hundred and fifty dollars. The application states that the loss, if any, is to be "payable to mortgagee, so far as his interest may appear,--John Prentice mortgagee."

To the question: "Where situate?" the answer is: "On section 24, town 4 south, range 5 east, county of Washtenaw." The printed part of the application states: "If the following questions are not answered, this application will be returned," and then proceeds to ask: "whet is the title?" to which the answer is: "Article of agreement." "For what purpose occupied, and by whom." Answer: "Dwelling, by Orin F. Gilbert." "Is your property incumbered, by what, and to what extent?" Answer: "By mortgage, four thousand dollars." "If incumbered, what is the whole value of your real estate (including buildings and land)?" Answer: "Value, eight thousand dollars or more." To the question: "State height of buildings to be insured, and distance from each other," he answered: "House 26 by 30, posts 16 feet." To the question: "In what state of repair?" (which clearly refers to all the buildings to be insured), he answers: "Good."

Upon this application the policy was issued, insuring the house for two thousand five hundred dollars, and the barn for two hundred and fifty dollars, and personal property, upon the value of which no question arises in this case, for the balance, making the whole policy five thousand five hundred and fifty dollars.

The policy (in addition to the provision making the application a part of it, and a warranty, as already noticed) contains the provision, that the company are to make good to the assured, his executors, etc., "all such immediate loss or damage, not exceeding in amount the sum insured, nor exceeding two-thirds the cash value of the buildings above specified, nor exceeding the cash value of the personal property hereby insured, as shall happen by fire and lightning," etc. It also contains a provision, at the close, in these words: "This policy is made and accepted upon the above express conditions, and the charter and by-laws of the company, which are to be resorted to and used to explain the rights and obligations of the parties hereto, in all cases not herein otherwise specially provided for, and which are hereby made a part of the policy." By the second section of the charter alluded to, it is provided that all persons insuring in the company, their respective heirs, etc., "continuing to be insured therein, shall be deemed and taken to be members thereof, for and during the term specified in their respective policies, and no longer, and shall at all times be concluded and bound by the provisions of this act." By section 6: "Insurance shall be made in all cases upon the representations of the assured, contained in his application therefor, and signed by himself or his attorney; which representation shall, in fairness and good faith, state all the material circumstances within his knowledge which may affect the risk."

By section 12: "Every member of said company shall be and is hereby bound to pay his proportion of the losses and expenses...